Corn Growers Consider Market-based Target Price
The safety net in the current National Corn Growers Association farm bill proposal is similar to the USDA proposal.
Mike Wilson
Published: Mar 1, 2007
The National Corn Growers Association met Wednesday to discuss a farm bill proposal similar to the revenue-based safety net proposed earlier this year by USDA Secretary of Agriculture Mike Johanns, except for two differences: NCGA would use a market-based target price instead of a fixed price in their safety net; and second, USDA's revenue countercycical is a national trigger, while NCGA's plan would be based on county revenues.
 "Our position has changed considerably, moving away from a fixed target price to a moving market price," says Steve Pigg, Bushnell, Ill., policy committee chairman.
The NCGA proposal, if adopted during Saturday's voting session, would use a moving price that enables farmers to guarantee a larger revenue per acre. For example, if USDA's proposal used a fixed target price of $2.34 per bushel, that price times 150 bushels per acre would guarantee $351 per acre; using a moving price based on Chicago Board of Trade spring prices, farmers could potentially guarantee much higher revenues — nearly double based on today's prices ($4 x 150 bushels).
The NCGA open forum meeting took place at the opening of the 2007 Commodity Classic this week in Tampa, FL held in conjunction with the American Soybean Association and, for the first time, the National Association of Wheat Growers.
The NCGA proposal would authorize significant changes in farm support programs to better protect producers against rising costs of production, crop losses and volatile comodity prices. The proposal includes direct payments and Revenue Counter Cyclical Program, a complimentary program modeled after group risk income protection insurance, which compensates producers when a crop's actual county revenue per acre falls below the expected county revenue per acre.
Payments would be based on planted acres, rather than base acres. "When realized actual county revenue per acre is less than expected revenue per acre, producers are compensated for the difference," explains Pigg.
RCCP is designed to compliment federal crop insurance and minimize overlapping coverage. According to NCGA it would compensate for both significant area and individual crop losses — a chronic complaint with today's farm bill program. "RCCP would reduce inequities in support when low prices are accompanied by crop shortfalls," he says.
The proposal would also integrate individual crop insurance, and include a recourse marketing loan program.
"The big key is integrating with crop insurance," says Pigg. "If there's a revenue countercyclical payment and you also have insurance, they would deduct the payment out of your insurance payment. If you take the price risk out of those crop insurance policies and all they have is the yield risk, it takes the cost of those insurance products way down."
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Tagged: insurance, NCGA, farm, usda, farm bill
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